It can be wonderful to share a business with your family, the very folks you know best, enjoy, care for and respect. Yet many families run into trouble when they try to work together. Their individual differences, past hurts and misunderstandings, expectations and curt communication patterns all make it hard to conduct business. Why are these negatives so hard to overcome?

A major reason is that a family business is a blend of two very different entities: a family, which unconditionally accepts and supports everyone, based on love and emotional connection, and a business, which must achieve challenging goals with people who are accountable but not obligated to each other. Competence is more important than care in a business. However, since the family came first and has a longer history, family members automatically bring their family habits and history into the business.

Because of this history, family members cannot just act as partners coming together to exercise rational self-interest. They have always been parents and children or brothers and sisters, and their styles of interaction are baked in. These lifelong ties and patterns inevitably lead to such habitual reactions as feeling something was unfair or someone was acting out of line. Families can also develop a deep sense of what we might call “family justice,” involving “whose uncle did what to your father” or “your younger brother or sister has no right to tell you what to do.” And actions that are normally “just business”—like offering negative feedback or even firing an unmotivated employee—mean something entirely different when they involve family members. They hurt personally and more deeply, surface prior conflicts, and can hurt can provoke anger and conflict in other areas. Furthermore, a family is also a moving target, as new generations grow up and transfer their expectations and relationships to the business realm. How can they put aside their past history?

To become an effective business family, family members must learn to separate emotional family dynamics from how they operate at work, interacting very differently than they do at home. Of course, that is easier said than done. For this to succeed and for a family to remain together as business partners over generations, they must develop and practice new ways of communicating, resolving conflict and aligning their interests. Bottom line: They must learn to act differently when they are in business mode.

One of the key differences is that while family communication is often emotional and informal, when family members work together in a business or share ownership (or even the promise of future ownership), they must be more thoughtful and less reactive in how they relate to each other. Working together is not a prize or a privilege; it is a responsibility, and business associates have a responsibility to each other as they make decisions and share information. Family members need to turn off some of their automatic patterns and take up others to keep from descending into confusion or unproductive conflict.  

Developing positive communication in a family business requires focus and commitment. The challenge is most evident when an intergenerational family comes together for their first business meeting. Because of their history, they have differing styles, viewpoints, values, ages, genders and even ways of living and working. While joined by blood, they feel anxious about whether they can find common ground and work together. They may all be heirs of a business that was started generations ago, and their entire lives may be focused on the expected outcomes and benefits of this legacy. It is likely that each family member has a different expectation for the business. To work together, they need to talk about these expectations and come to agreement about what they can reasonably expect.

Most families that start a business together do so without considering how they can overcome the emotional traps and habits that have evolved over time within their family. What all family businesses need to do first is create an environment for effective communication. This begins by making the business meetings a safe place for family members to talk to each other and be listened to with respect. One way to create such a safe harbor is for the family to develop what we call a Code of Conduct, which defines rules and habits for how they will talk to each other, not what they will talk about. 

What Is a Code of Conduct?

The code is a list of rules (or expectations) for communication that everyone agrees to hold each other to when they meet or interact for business matters. A family often has many bad habits—dominating, interrupting, blaming, and making assumptions—that inhibit communication. A family business meeting can’t even begin without confronting these bad habits and deciding to help each other behave differently— like addicts who must support each other to overcome self-destructive patterns. The usual family ways of behaving developed over time to deal with personal relationships and emotional realities, but they are more likely than not to be counterproductive for a family business. For example, a family may have a habit of not talking about money or conflicts or of letting some members’ views dominate the views of others. To run a business together, they must act differently.

Developing a Code of Conduct might start with each family member sharing something that they feel the family must do more of or less of to ensure a safe environment for communication. This gives each person a chance to share their anxieties before things begin. It is not hard for families to identify habits that inhibit communication. The first things that inevitably come up are such requests as “Don’t interrupt,” “Get everyone to talk, not just the people who always dominate” or “Talk about yourself without blaming others.”

Developing new rules is a way for the family to formally acknowledge that they want a fresh start. The discussion enables the family to be open and candid with each other and allows each member to express what is needed for them to feel safe. The family should write the requested principles on a large piece of paper and place it on a wall so that everyone can see them throughout the meeting and recognize that they are being asked to honor these principles. Furthermore, family members should be encouraged to point out when they feel someone is not practicing them.

The more each family member can express their concerns and feel that others have heard them, the more committed the family will be to their Code of Conduct. They understand that it marks the family’s entry into a new way of working together, which will be challenging as it means overcoming long-held habits. But by starting with this mutually created agreement, the family builds a foundation that will help them avoid escalating conflicts later.

Three Key Elements

The Code of Conduct is more than ambiguous values and general principles. It clearly defines what behaviors are desired and what behaviors are to be avoided to develop a beneficial family business environment. They generally fit into three areas:

Positive Communication

A family needs to state clearly how they want to interact as a business. Some commonly requested practices include: “Do not interrupt someone when they are speaking”; “Start with something that is positive before asking for change”; and “Everyone should speak once before someone talks again.” Each of these supports and encourages participation and helps family members slow down their reactiveness and really listen to each other. They counter a habit that many family members have, which is that after being together so long, they sometimes do not really listen when other members are talking.

Additional guidelines might focus on avoiding disrespectful and aggressive patterns, asking that family members refrain from making accusations, keep a soft tone of voice, and state what they want rather than what others have done that bothers them. Members might also be asked to give concrete examples of their concerns when they speak.

Overcoming Emotional Explosions

There are many types of statements a family member might make that act as emotional triggers, so called because they call up memories of past events that were hurtful. Families often react to such triggers by exploding in anger. Or they might choose to underreact and avoid a battle by sweeping the conflict under the rug. Neither reaction promotes good business communication.

Rules about behavior can’t always stop eruptions of feeling, but they can limit them and slow down the escalation of a conflict. At their best, rules can help a family consider other ways to deal with strong emotional reactions. Also, the presence of other family members at a meeting can sometimes help two people who are upset over something to step back and look more clearly at what is happening.

Staying on Track and in Focus

While family conversations often shift back and forth in time and might include long rambling stories and memories, a business conversation needs to stay focused and on topic. Codes of Conduct can specify that business conversations stick to the topic and that all members are responsible for helping to make this happen.

While the first family meetings can be used to create the Code of Conduct, reviewing and affirming these mutually created rules should be the first topic on the agenda of every business meeting, even if only three people are present. This is important because it is natural for each person to enter a family meeting with fears about talking and concerns that they will not be listened to or respected. These are not irrational fears—family members often say or do things they later regret. Reviewing the code can allay these fears and encourage positive interaction.

What happens if someone does not follow the Code after it is agreed upon? Who oversees policing it, gently reminding members who slip up? This role can be jointly held by the family member or outside helper who is the facilitator—the person whose role is to make sure the meeting goes well—and by all family business members. A family often allows anyone to break in and observe that someone is not observing the rules. For example, a member may make such comments as “He isn’t finished” or “Let’s slow things down, people seem to be getting upset.” These process comments show that all family members feel responsible for adhering to the rules and can hold each other accountable.

A family business Code of Conduct is a set of agreed upon rules and understandings that a family creates to make a safe, comfortable and positive setting for their communication in a business meeting. The family that adopts such a code may ultimately decide that these rules are useful not only for business meetings but for all their interactions. The entire family may agree to strive to adopt these standards for how they talk and behave with each other in daily life. When that happens, the code may become part of their family mission, vision and values, enshrined in their family constitution, which is their operating agreement as a family enterprise.

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